Energy efficiency and fuel poverty - Environment, Food and Rural Affairs Committee Contents


Examination of Witnesses (Questions 198-199)

MS SARAH HARRISON AND MR CHARLES HARGREAVES

10 DECEMBER 2008

  Q198 Chairman: We welcome our second set of witnesses. I am sorry our previous session overran a little bit. When you are on a voyage of discovery you never quite know where you are going to pitch up. You can see we were probing one or two areas with some thoroughness. Can I welcome, on behalf of the regulator, Ofgem, Sarah Harrison, managing director, and Charles Hargreaves, the head of environmental programmes. One of the flavours that came out from our earlier evidence, some of which you may have heard, is a feeling that we have met something of a watershed. Our earlier witnesses said there needed to be, at this moment, a fundamental rethink about the approach towards fuel poverty issues. That was not to say that some useful work had not already been done, that was not to say that existing programmes were not capable of contributing towards the problem but I think they felt that efforts needed to be refocused. How do you feel, as an organisation, about statements like that, bearing in mind we do seem to be on an upward trend with reference to the number of people, by our current definition of fuel poverty, who are within that category?

  Ms Harrison: You will find in our own written submission we have also made the point that it is a good time to take another look at the strategy. Perhaps I could go back to some suggestions that Ofgem itself made to government in 2006 in response to the Energy Review and return to some of the ideas which we still think bear consideration today; the first relates to the range of different schemes and measures that exist. In 2006 we argued for government to think about whether there was scope to pool the resources of some of those schemes and to look to create a function to centrally administer them for two reasons: one, to look at ways of making sure those schemes worked in synchronicity with one another and complementing one another; and the other issue being, from a customer and householder perspective, to make sure those measures and schemes were well understood. The second principal point we made again in 2006, but certainly relevant today, is the central challenge of targeting and identification; we dubbed it a find and fix approach. We are very pleased to see some progress has been made in relation to data sharing. We think this remains a central challenge and would certainly encourage government to look at ways in which data can be made available, with all the appropriate protections—and I note some of the comments that came out from the earlier session on that—to really target help effectively. If I could give one small example of a find and fix approach and schemes working together, when Ofgem hosted, in April of this year, a fuel poverty summit, led by our chairman John Mogg, the whole objective of that was to try and see what could be done, very practical actions, to better target existing help to households most in need. One of the schemes and trials that came out of that was a partnership between suppliers and eaga. Where eaga people are in households giving advice on Warm Front measures, giving advice on benefits entitlement, as the eaga scheme allows, they were also prompting that householder to think about approaching their supplier to get tariff advice. The trial has been running, and has just come to an end, targeting 3,000 households and has been very successful in terms of householders approaching suppliers and looking for further tariff advice and, in some cases, moving on to better tariffs or indeed social tariffs. That is a modest example, but for us a very good example, of where the need to bring schemes together to have a more holistic approach really can bear fruit. The other slightly nearer-term issue I would like to highlight for the Committee is given the fundamental challenges of fuel poverty incomes, energy prices, housing and energy efficiency, from an incomes' perspective it still is extraordinary that in terms of benefits uptake we have some £6 billion to £10 billion of unclaimed benefits. I know there has been some relatively recent research done on this by Help the Aged who identified that over their lifetime an older citizen could be entitled to up to £50,000 of unclaimed benefits. There is a very near-term issue, particularly as we face the very obvious challenges of this winter, of seeing what more could be done to improve benefits uptake because that will increase the incomes available to households and help them to face the challenges of rising energy bills.

  Q199  Chairman: You provide us with a very helpful background, and in terms of the effectiveness of some of the programmes we will come on and ask some questions in more detail so I will restrain my enthusiasm for following your well-placed analysis. I would like to ask about Ofgem because your principle remit has been about securing competition, if you like, overlain by environmental and social policy. The Secretary of State in his recent remarks seems to be taking some issue and perhaps raising the question as to whether all these competitive mechanisms have served customers well and serving notice that dealing with the fuel poor is going to be an important priority of the new department. Do you think, in the light of my question and the remarks of the Secretary of State, this means Ofgem will have to consider how it balances its response to the different things for which you are responsible?

  Ms Harrison: My first point is that Ofgem's principal objective is to protect customers, and to protect customers wherever appropriate through the promotion of competition and where not through regulation. Parliament has very recently revisited just this issue and has given Ofgem, in some respects, a fresh mandate confirming that should remain its principal goal: the protection of customers' interests where appropriate through promotion of competition and elsewhere through regulation, but customers in a sense of both today's customers and future customers. Parliament has also raised up the hierarchy and given more prominence to our role in respect of sustainability and we very much welcome that mandate. What is very important against the background of the goal to protect customers' interests is we see there are a number of things for us to do: first of all, coming back to the question of fuel poverty and thinking about the contribution of high energy prices in relation to fuel poverty, it very much is to ensure that the prices that energy customers are paying are fair in the sense of reflective of cost and are no higher than they need to be. We do that through the exercise of our powers as a competition authority and indeed through our more bread and butter work of setting the revenues of the monopoly energy transportation businesses to allow them to invest in infrastructure and to secure value for money for customers in that process. We see very much the challenge in relation to making the competitive markets work effectively for customers as a key issue. Of course we have spent the last few months doing a very forensic look at the way in which the energy retail market is working for customers. While we have found in some important respects it is working well and there is no cartel and we are satisfied in a number of respects, we have found that it has fallen short of working well for some customers, customers on pre-payment meters, customers who are off the gas grid for example. There we have put out some detailed proposals that we are testing, and have just completed that testing process, as to how we make those markets work more effectively on behalf of those households. In that respect we very much share the Secretary of State's goal to be sure that the market is delivering very effectively and fairly for all customers particularly for those who are vulnerable and facing fuel poverty.


 
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